Total sales in 2017 were DKK 14,531 million, an increase of 4% organically and 3% in DKK.
Gross profit and margin
Gross profitA company’s total revenue (equivalent to total sales) minus the cost of goods sold. increased by 4% to DKK 8,413 million from DKK 8,126 million in 2016. The gross margin was 57.9%, up from 57.5% in 2016. Productivity improvements had a positive impact on the gross margin, somewhat offset by unfavorable mix and price changes.
Operating costs increased by 2% to DKK 4,363 million. Operating costs as a percentage of sales were 30%.
- Sales and distribution costs were unchanged, representing 11% of sales
- Research and development costs increased by 3%, representing 13% of sales
- Administrative costs increased by 3%, representing 6% of sales
Other operating income
Other operating income was a net loss of DKK 3 million, compared with a net income of DKK 117 million in 2016. The decrease in 2017 was mainly caused by a loss of DKK 66 million relating to the divestment of Albumedix late 2017. After careful review of Albumedix’s future activities and needs, Novozymes concluded that the entity no longer benefits from being part of the Group. Novozymes and Albumedix have found a good future ownership solution for Albumedix, with Novozymes retaining 8% ownership of the company.
EBITDAEarnings before interest, tax, depreciation and amortization. increased by 3% to DKK 5,114 million, up from DKK 4,960 million in 2016. Depreciation, amortizationAccounting term that refers to the process of allocating the cost of an intangible asset over a period.and impairment losses were DKK 1,067 million in 2017, up 5% from DKK 1,014 million in 2016. The increase in depreciation was mainly attributable to acquisitions, such as Organobalance GmbH in 2016.
EBIT and EBIT margin
EBITThe profitability of the business, before taking into account interest and taxes. To determine operating profit, operating expenses are subtracted from gross profit. increased by 3% to DKK 4,047 million, up from DKK 3,946 million in 2016. The EBIT marginEarnings before interest and tax as a percentage of revenue. ended at 27.9%, unchanged from 2016. Excluding the one-time costs relating to layoffs at the beginning of 2017, the cost associated with the change to the Executive Leadership Team during the year and the loss on the divestment of Albumedix, the EBIT margin was around 29%.
Net financial costs were DKK 157 million in 2017, compared with DKK 34 million in 2016. Net financial costs in 2017 were impacted by a write-down of DKK 120 million on a financial asset related to a guarantee provided by M&G. Due to financial difficulties in the M&G Group, it is now assessed that the financial asset will not be recovered and it has been written down.
The effective tax rateIncome tax expense as a percentage of profit before tax. was 19.5%, compared with 21.4% in 2016. In 2017, Novozymes transferred intellectual property from Switzerland to Denmark. This had a positive impact on the effective tax rate of roughly 2 percentage points. The one-time negative impact of adjusting the deferred tax to the new US tax rate was almost 1 percentage point.
Net profit grew by 2% to DKK 3,120 million in 2017, up from DKK 3,050 million in 2016, driven by higher EBIT and a lower tax rate, but partly offset by the write-down included in financial items.
Earnings per share
Earnings per share increased by 4% to DKK 10.56, compared with DKK 10.15 in 2016, due to higher net profit and cancellation of shares.